Question

Calculating break-even volume. Jasmine Gonzales, administrative director of Small Imaging Center, has been asked by the practice members to see if it is feasible to add more staff to support the practice's mammography service, which currently has two screen units and two technologists. She has compiled the following information:

• Reimbursement per screen: $75

• Equipment costs per month: $1,600

• Technologist cost per mammography: $20

• Technologist aide per mammography: $4

• Variable cost per mammography: $10

• Equipment maintenance per month per machine: $700

a. What is the monthly patient volume needed per month to cover fixed and variable costs?

b. What is the patient volume needed per month if Small Imaging Center desires to cover its fixed and variable costs and make a $5,000 profit on this equipment to cover other costs associated with the organization?

c. If reimbursement decreases to $55 per screen, what is the patient volume needed per month to cover fixed and variable costs but not profit? d. If a new technologist aide is hired, what is the patient volume needed per month at the original reimbursement rate to cover variable costs but not profit?

Answer 1

a. Calculation for Monthly patient volume required
Revenue consider reimbursement per screen		$75
Variable cost
Technologist cost per mammography	$20
Technologist aide cost per mammography	$4
Variavle cost per mammography	$10
Total variable cost	$34
Contribution margin (revenue- variable cost)		$41
Fixed cost
Equipment cost per month	$1,600
Equipment maintenance cost	$700
Total fixed cost	$2,300
Monthly patient volume required ( fixed cost/ contribution)	56.09756098
So near about 57 patient required
b. If profit required $5000
Revenue consider reimbursement per screen		$75
Variable cost
Technologist cost per mammography	$20
Technologist aide cost per mammography	$4
Variavle cost per mammography	$10
Total variable cost	$34
Contribution margin (revenue- variable cost)		$41
Fixed cost
Equipment cost per month	$1,600
Equipment maintenance cost	$700
Total fixed cost	$2,300
Monthly patient volume required ( fixed cost+ profit/ contribution)	178.05
So near about 179 patient required
c. If reimbursement decrease to $55
Revenue consider reimbursement per screen		$55
Variable cost
Technologist cost per mammography	$20
Technologist aide cost per mammography	$4
Variavle cost per mammography	$10
Total variable cost	$34
Contribution margin (revenue- variable cost)		$21
Fixed cost
Equipment cost per month	$1,600
Equipment maintenance cost	$700
Total fixed cost	$2,300
Monthly patient volume required ( fixed cost/ contribution)	109.52
So near about 110 patient required
d.Technologist aide hired
Revenue consider reimbursement per screen		$75
Variable cost
Technologist cost per mammography	$20
Technologist aide cost per mammography ($4*2)	$8
Variavle cost per mammography	$10
Total variable cost	$38
Contribution margin (revenue- variable cost)		$37
Fixed cost
Equipment cost per month	$1,600
Equipment maintenance cost	$700
Total fixed cost	$2,300
Monthly patient volume required ( fixed cost/ contribution)	62.16
So near about 63 patient required